Tax Law Technical Note

Designing Interest and Tax Penalty Regimes

Author/Editor:

Christophe J Waerzeggers ; Cory Hillier ; Irving Aw

Publication Date:

March 18, 2019

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Nearly all tax systems have some form of interest and tax penalty regimes. Interest payable on any late or underpayment of tax seeks to protect the present value of the tax amount to the government budget, whereas penalties are intended to deter taxpayers from defaulting on their tax obligations—and to punish them if they do—to achieve horizontal equity vis-à-vis compliant taxpayers. As interest and penalties serve very different objectives, they should not be applied in a mutually exclusive manner. This Tax Law IMF Technical Note focuses on the key issues that should be taken into consideration in designing interest and penalty regimes in tax legislations.

Series:

Tax Law Technical Note No. 2019/001

Subject:

External debt Interest payments Interest tax Legal support in revenue administration Revenue administration Tax administration core functions Tax law Tax policy Taxes